Casey Research Publication
Gold & Silver Daily
"I get the impression that something is going on behind the scenes in gold and silver that the powers that be don't want us to know about at the moment."
 

¤ Yesterday In Gold & Silver

It was a very quiet day for gold in the Far East yesterday...and the same can be said for early trading in London.  By the time that the Comex opened at 8:20 a.m. yesterday morning, gold was back to within a couple of bucks of its Tuesday afternoon close in New York.

I'd say you can probably read a graph just as well as I can, but it's as plain as the nose on your face that virtually every dollar of yesterday's sell-off came during the New York trading session...all of it in a 3-hour time period between 8:20 a.m. and 11:20 a.m. Eastern.

The subsequent price recovery wasn't allowed to get far...and the gold price closed near its low of the day.  The close was $1,576.50 spot...down a whopping $54.40.  Volume was a gargantuan 303,000 contracts, net of what few roll-over there were.

With 20-20 hindsight, you can see just how carefully this last 2-day sell-off was planned.  The 'powers that be' waited until after the Comex close on Tuesday [the cut-off for tomorrow's Commitment of Traders Report] before they made their big move...and in less than twenty-four hours [starting minutes after 2:00 p.m. Eastern time on Tuesday] they had bombed the gold price exactly $100.  About $95 of that occurred during the New York trading day...and nowhere else.

The silver price action during the Wednesday trading day was a variation of what happened to gold.  The silver price developed a negative bias about 3:30 p.m. in Hong Kong, about thirty minutes before the London open.  Then, starting at 11:00 a.m. in London, the real selling pressure began, interrupted by a brief rally [just like gold] going into the Comex open in New York.  Then the roof really caved in.

The low tick [$28.42 spot] was followed by a decent rally that also wasn't allowed too get far, either...and silver closed at $28.96 spot...down $1.88 on the day.  The intraday price move, using the $31.00 Far East spot price as a high, was $2.58...or 8.3%.  Net volume was an eye-watering 84,000 contracts...and what I said about the sell-off in gold, applies equally to what happened in silver.

Except for a 50 basis point rally between 5:00 a.m. and 11:00 a.m. Eastern time, the dollar did very little either before or after those times.  If you're looking to pin yesterday's damage in gold and silver on anything that happened in the currency markets, you'll come away disappointed.

Considering the damage done to the gold price, the stocks held up pretty well, at least in my opinion...and they finished the day well off their low.  The HUI closed down 2.95%.

Unfortunately, the silver shares really got in the neck...and that should come as no surprise considering how badly the bullion banks kicked the living crap out of the silver price.  Nick Laird's Silver Sentiment Index was down 6.40%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that a huge 1,823 gold contracts....and 6 silver contracts...were posted for delivery on Monday. I must admit that I was initially taken aback by the gold delivery number...but I'm now absolutely convinced that it had everything to do with the increases in open interest for the December delivery month that I've been talking about for the last three or four days.  Someone wanted physical gold in a hurry...and was jumping in to take delivery even after first notice day, which had long since past.

The big short/issuer was HSBC USA delivering 1,770 contracts.  The biggest long/stopper on the receiving end was the Bank of Nova Scotia with 1,037 contracts.  JPMorgan was a distant second with 650 contracts stopped...242 in its client account and 408 in its proprietary [house] trading account.  This Issuers and Stoppers Report is worth the look...and the link is here.

For the second day in a row, there was no in or out movement reported in either GLD or SLV.  Considering the down-side price action, this is quite something.  As I pointed out yesterday, maybe the big naked shorts in both these ETFs [JPMorgan et al] are now covering their shorts by buying every ounce of both gold and silver that the public is selling during this price rout.

The U.S. Mint had another sales report yesterday.  They sold another 9,000 ounces of gold eagles...1,500 one-ounce 24K gold buffaloes...and 50,000 silver eagles.  Month-to-date the mint has sold 41,500 ounces of gold eagles...10,500 one-ounce 24K gold buffaloes...and 1,406,000 silver eagles.

Over at the Comex-approved depositories on Tuesday, they reported receiving 515,800 ounces of silver...and shipped 411,064 troy ounces of silver out the door.  The link to that action is here.

Silver analyst Ted Butler had a longish mid-week commentary for his clients yesterday.  Here are a couple of free paragraphs...

"What I didn’t explain in my weekend commentary on Saturday was that the next logical downside trigger point in gold for selling by the technical funds and traders was the 200 day moving average ($1610). This particular moving average had not been broken in gold for almost three years, back to when gold was under $900. The longer a moving average remains unbroken, the more significance it holds to technical traders. This level has now been broken as well, encouraging those holding gold on technical or price movement grounds to sell. This selling begets other selling as fear of further losses resonates through the market as prices plunge. The price declines step up demands for more margin, prompting further long liquidation.

"Given human nature and our collective demand for easy to understand explanations for why prices are falling there will be, for sure, all manner of supply/demand explanations given to justify the price rout. But there have been scant signals from the real world of supply and demand to account for the decline in gold and silver prices. At the core, this is strictly another COMEX-commercial rig job. That it has been highly successful for the commercial crooks is unfortunate in many ways, but encouraging in other ways. The proof that it is another COMEX rig job is fairly easy to demonstrate in past and future Commitment of Traders Reports (COT), as the commercials are always big buyers on these price smashes. We have only gone down in price so that the commercial could buy. It’s not possible that the commercials can always be big buyers on such declines for any other plausible explanation. That the CFTC sits by, even though it has been armed with new anti-manipulative regulations is as shameful as it gets.

It was a busy day at my bullion guy's store...both Tuesday and Wednesday.  He had just about all the business he could handle.  It was obvious that the buy-the-dip crowd was out in force.  I hope you were out there buying physical metal with both hands yourself, dear reader.

I have the usual number of stories today...and quite a number of them are more than worth your while.

 

¤ Critical Reads

Bernanke Signals Risks From Europe Crisis Keep Fed Ready for More Easing

Federal Reserve Chairman Ben S. Bernanke signaled he’s concerned Europe’s crisis will hobble a 2 1/2-year U.S. expansion that may need another boost from the central bank.

The Fed’s policy-setting panel, which met in Washington yesterday, said the economy “has been expanding moderately,” compared with the Nov. 2 assessment that growth “strengthened somewhat.” At the same time, the central bank added a reference to “apparent slowing in global growth,” and said that “strains in global financial markets continue to pose significant downside risks to the economic outlook.”

Bernanke and his colleagues may be considering more measures to aid growth and improve public understanding of Fed policy, which could be unveiled as soon as their next meeting taking place Jan. 25-26, said Julia Coronado, chief North America economist at BNP Paribas. The Fed reiterated that it expects joblessness to drop “only gradually. They still see downside risks, so I still think they’re tilted toward easing.” said Coronado.

This Bloomberg story filed late Tuesday night was sent to me by Nitin Agrawal...and the link is here.

Read more...

MF Global's Fractional Reserves

Jon Corzine told the House Agriculture Committee, "I simply do not know where the money is, or why the accounts have not been reconciled to date." The public is outraged that the former CEO of bankrupt global financial-derivatives broker and prime dealer in US Treasury securities MF Global doesn't know where the missing $1.2 billion in client funds went.

Corzine is the member a few exclusive clubs: he is a Goldman Sachs alum, former US senator, and former New Jersey governor. After the incumbent Corzine was beat by Chris Christie in the 2009 New Jersey gubernatorial race, the MF board probably rejoiced, believing the guy to fix their problems was suddenly available. Now he's in the club of taking a mere 20 months to create the eighth largest bankruptcy in history.

This Doug French article was posted over at the mises.org website yesterday.  Even though the MF Global story has been around a while, this one is definitely worth the read.  I thank West Virginia reader Elliot Simon for sending this along...and the link is here.

Read more...

MF Global’s Risk Officer Said to Lack Authority

A House committee is expected to disclose on Thursday that MF Global, under Jon S. Corzine, stripped critical powers from its top executive in charge of controlling risk, according to a person briefed on the matter.

The move left the firm short-handed as it was grappling with the implications of its $6.3 billion position on European sovereign debt, a trade large enough to wipe out the firm if it soured.

Earlier this year, MF Global replaced its chief risk officer, Michael Roseman, after he repeatedly clashed with Mr. Corzine over the firm’s purchase of European sovereign debt. The new risk officer, Michael Stockman, took over the position in early 2011 with one major difference: unlike his predecessor, he was not allowed to weigh in on the broader implications the trades might have on the firm, including whether they might undermine investor confidence.

This longish story was posted on The New York Times website late last night...and is a must read.  I thank reader Phil Barlett for sliding it into my in-box in the wee hours of this morning.  The link is here.

Read more...

Exclusive: Regulators know where MF Global funds went

Regulators now have a more complete picture of money transfers in the final days of bankrupt brokerage MF Global, but must sort out which transactions were legitimate before more money can be released to customers, a top official told Reuters on Wednesday.

Jill Sommers, who is heading the Commodity Futures Trading Commission's review of MF Global, said regulators "are far enough along the trail" that they know where the money went.

"Now it's just finding out which ones of those transactions are legitimate and which ones of them are illegitimate," Sommers said.

This Reuters piece from early yesterday evening was sent to me by reader Roy Stephens.  It's a must read in my opinion...and the link is here.

Read more...

Von Greyerz sees currency collapse, hyperinflation in King World News interview

All major countries are bankrupt, as is the whole world financial system, fund manager Egon von Greyerz tells King World News today, and while the focus is on Europe for the moment, it will shift to the United States, and the only solution for governments will be infinite money printing leading to currency collapse, hyperinflation, and social turmoil.

The introduction is courtesy of Chris Powell...and the link to the KWN blog is here.

Read more...

Sinclair tells King World News not to fall for deflation talk

Interviewed at King World News, mining entrepreneur Jim Sinclair, who spoke at GATA's Gold Rush 2011 conference in London in August, surveys today's turmoil in the gold market, attributes it to political comments favoring deflation, isn't having any of it, and continues to predict "QE to infinity" and a gold price running close behind.

Chris Powell also wordsmithed the preamble to this...and the link to this KWN blog is here.

Read more...

Reaction to US Tax Law: European Banks Stop Serving American Customers

European banks are dumping clients with US citizenship due to a new American law meant to curb tax evasion. The law would require financial institutions around the world to report on certain client activities. Compliance, say many banks, is way too expensive.

The idea was to ensure that US citizens were paying their taxes on investments made through overseas banks. The result, however, has been that Americans in Europe may have difficulties finding banks who want their business.

According to a report in the Wednesday edition of the Financial Times Deutschland, several European banks have elected to no longer serve American securities investors due to stricter reporting requirements pushed through last year by the administration of President Barack Obama.

This article, posted at spiegel.de yesterday, is a must read for all U.S. citizens to which it may apply.  It's another Roy Stephens offering...and the link is here.

Read more...

Fitch Downgrades Ratings on Five Major European Banks

In a press release, the rating firm said it downgraded Banque Federative du Credit Mutuel, Credit Agricole, Danske Bank , OP Pohjola Group and Rabobank Group.

The firm said the downgrades reflect the "broader phenomenon of stronger headwinds facing the banking industry as a whole. Exposure to troubled euro zone countries through their subsidiaries was a direct consideration in the downgrades of Danske Bank and Credit Agricole."

For the other banks, Fitch said the crisis had "negative indirect consequences."

This very short cnbc.com story was posted late last night...and I thank West Virginia reader Elliot Simon for sending along his second offering in this column.  The link is here.

Read more...

Unemployment in the U.K. surges to 17-year high as eurozone crumbles

Total unemployment is now higher than at any point during the recession causing industry experts to warn the private sector jobs market recovery has "stalled".

In a series of grim figures delivering a pre-Christmas blow to the Government, the jobless toll for all age groups rose by 128,000 between August and October to 2.64m, the highest total since 1994.

The unemployment rate was 8.3pc, up 0.4pc on the previous three months, said the Office for National Statistics.

The number of women out of work surged by 45,000 on the quarter to reach 1.1m, the highest figure since 1988.

This story was posted in The Telegraph yesterday morning...and is Roy Stephens last offering of the day, for which I thank him.  The link is here.

Read more...

China's epic hangover begins

China's credit bubble has finally popped. The property market is swinging wildly from boom to bust, the cautionary exhibit of a BRIC's dream that is at last coming down to earth with a thud.

Chinese stocks are flashing warning signs. The Shanghai index has fallen 30pc since May. It is off 60pc from its peak in 2008, as much in real terms as Wall Street from 1929 to 1933.

It is hard to obtain good data in China, but something is wrong when the country's Homelink property website can report that new home prices in Beijing fell 35pc in November from the month before. If this is remotely true, the calibrated soft-landing intended by Chinese authorities has gone badly wrong and risks spinning out of control.

The growth of the M2 money supply slumped to 12.7pc in November, the lowest in 10 years. New lending fell 5pc on a month-to-month basis. The central bank has begun to reverse its tightening policy as inflation subsides, cutting the reserve requirement for lenders for the first time since 2008 to ease liquidity strains.

The question is whether the People's Bank can do any better than the US Federal Reserve or Bank of Japan at deflating a credit bubble.

This Ambrose Evans-Pritchard article, posted in The Telegraph very late last night, is courtesy of Australian reader Wesley Legrand.  It's a must read...and the link is here.

Read more...

Irked by GATA, Bank of England denies gold loans, swaps since 2007

In further correspondence with our British friend James Bern, a Bank of England official this week indicated that the bank, as custodian of the United Kingdom's gold reserve, has not engaged in gold lending or swapping from 2007 through the middle of this year.

The letter, sent by e-mail by Ben Norman, deputy secretary for the bank's Public Communications and Information Division, also objects to GATA's characterization of the October 24 statement to Bern by another Bank of England publicist, Jackie Keating, which, GATA reported, confirmed that the bank is surreptitiously active in the gold market.

This rather long GATA release from yesterday morning contains an extensive exposé by GATA's secretary treasurer, Chris Powell.  It's well worth the read...and the link to that, and the letter in question, is here.

Read more...

Louis James on Buying Low

The editor of Casey Research's monthly publication, the International Speculator, is interviewed by Casey Research CEO, Olivier Garret.  They talk extensively about the entire metals market, with particular emphasis on gold and silver.

The interview appeared in yesterday's edition of Casey's Daily Dispatch...and it's certainly worth your time.  The link is here.

Read more...

Peter Grandich bets a million dollars on the gold price

Market analyst and mining consultant Peter Grandich may be the first in the precious metals universe to stick his head up out of the trench during today's bombardment to reassert his expectation that gold still has a long way to go to the upside...and to put his money where his mouth is. Grandich's commentary is headlined "A Million Reasons Why I Love Gold."

I thank Chris Powell for providing the above introduction...and the link to Peter's must read column is posted at his grandich.com website.  The link is here.

Read more...

Slumping solar prices rub the shine off silver

The solar industry's rapidly growing demand for silver could hit a wall next year, as the rising price of the precious metal forces solar cell makers to cut use of the metal in their battle against overcapacity and a near halving of product prices.

Silver consumption by solar panel makers nearly doubled in 2010, exceeding growth in all other industrial applications and capturing the attention of silver bugs. But the curve has flattened this year, and looks likely to head south in 2012.

Overcapacity in the solar industry ranges up to 10 gigawatt, or two thirds of 2010's production, and will continue to outstrip weak global demand, which analysts expect to grow just 6 percent in 2012.

I'm not expert in this area, so I don't know how much truth there is in this Reuters story that was filed from Singapore and Hong Kong yesterday, but I thought it was worth posting nonetheless.  I thank reader Elliot Simon for bringing it to my attention...and the link is here.

Read more...

MidasLetter Money: James West Interviews Eric Sprott

James asks Eric about his views on the silver futures market, and Eric makes the case that the physical spot price of silver is determined by the highly manipulated paper futures market.

I'm sure that Eric has more than a few gold coins to rub together...and although he may have been born at night...it wasn't last night.  He understands perfectly well that the Comex silver and gold markets are rigged seven ways to heaven by the '8 or less' Commercial traders.

The interview runs a bit over ten minutes...and is posted over at the midasletter.com website.  It's an absolute must listen...and I thank reader Matt Nel for sharing it with us.  The link is here.

Read more...

John Embry - This Gold Smash Will Pass, the Case for Fiat is Zero

Here's a King World News interview that Eric sent me late last night.  Anything that John has to say is well worth reading...and the link to the KWN blog is here.

Read more...

Citi Predicts Gold At $3,400 In "The Next Two Years", Potential For Move As High As $6,000

We present the just-released slide deck from Citi's FX Technicals group titled "The 12 Chart of Christmas" which has some blockbuster predictions about the coming year, chief among them is without doubt the firm's outlook on gold which they see at $2,400 in the second half of 2012, and moving "toward $3,400 over the next 2 years or so."

So for those looking at [yesterday's] price action, consider it an opportunity to roll out of paper exposure and into gold, because the more deflationary the environment gets, the more eager the central planning cabal will be to add a zero (which in our day and age of primarily electronic money, can be done with the flip of a switch) to the end of every worthless piece of monetary equivalent paper in circulation. And that's a 100% certainty.

This zerohedge.com piece from yesterday afternoon was sent to me by Australian reader Wesley Legrand...and it's his second offering of the day.  This short read is a must read...and the link is here.

Read more...

 

¤ The Funnies

(Click on image to enlarge)

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¤ The Wrap

It is dangerous to be right in matters on which the established authorities are wrong. - Voltaire

Well, the powers that be made sure that gold's 200-day moving average was taken out with a vengeance...and it certainly was.  This was not death by a thousand cuts...but death by one quick thrust...which caused speculative long liquidation on a biblical scale...as the volume figures in both gold and silver showed.  As I said in this column yesterday, 'da boyz' seem to be in one hell of a hurry to get this liquidation over and done with...and that they did.

And as I said in Wednesday's column...and as silver analyst Ted Butler said in this commentary to paying subscribers yesterday..."This particular moving average had not been broken in gold for almost three years, back to when gold was under $900 the ounce.  The longer a moving average remains unbroken, the more significance it holds to technical traders.  This level has now been broken as well, encouraging those holding gold on technical or price movement grounds, to sell.  This selling begets other selling, as fear of further losses resonates through the market as prices plunge.  The price decline step up demands for more margin, prompting further long liquidation."

Here's the 3-year gold chart showing the 200-day moving average.  The 'click to enlarge' feature will prove useful at this juncture.

(Click on image to enlarge)

The RSI [Relative Strength Index] is the lowest it's been since some time in 2008...and we are now more oversold than we've been in more than three years as well.  To me, this indicates that the bottom is in...or darn close to it.  You can check the chart yourself and see that this is the case.  As I said in this column yesterday, if I wasn't already 'all in'...I would have been buying with both hands yesterday.

Here's the 3-year silver chart.  As you can tell, the silver price has been below its 200-day moving average on many occasions over the last three years.  In fact, we haven't been above it since the late-September drive-by shooting.  At the moment, silver is over seven dollars below that moving average.  There's nothing left to liquidate...and yesterday's big drop in price probably didn't get much, if any, further speculative long liquidation...as they're already long gone.

(Click on image to enlarge)

And, like yesterday, the preliminary open interest numbers for both gold and silver showed monstrous increases.  This is only possible if the true liquidation activity is being hidden with spread trades...or the small Commercials are going massively long...or the technical funds have been tricked into going short...or a combination of 'all of the above'.  Unless it's a combination of all three, these open interest numbers are not to be believed.

Tuesday's final open interest numbers in gold and silver also showed small increases associated with huge declines in prices in both metals...and are not credible unless what should have happened yesterday, also happened on Tuesday.

Gold is down $100 in two trading days...and open interest is rising?  Either these numbers are flat out wrong...or JPMorgan et al are hiding their tracks very well.  Unfortunately, we won't know for sure until next Friday's Commitment of Traders Report.  These crooks are really good...I certainly have to hand it to them.

And lest I forget, another 518 contracts were added to the December open interest in gold.  This is the fourth or fifth day almost in a row where we've had an increase in December open interest.  Someone really wants physical desperately.

After ten years of following the gold and silver markets, the needle on my b.s. meter is pegged.  I get the impression that something is going on behind the scenes in gold and silver that the powers that be don't want us to know about at the moment.  We'll find out soon enough if there is anything to all this.

So, where to from here?  Well, when the next rally starts, we'll find out pretty quick if the bullion banks are going to go back on the short side of this market.  If they do...it's the same old, same old as it's always been.  But if this engineered decline by the '8 or less' traders was last swing for the fences in gold and silver...and they don't show up as not-for-profit sellers, or sellers of last resort, then it will be a whole new ball game.

The gold price didn't do much in Far East trading during their Thursday session...and gold's low price came shortly before 3:00 p.m. Hong Kong time...and gold is up about eleven bucks now that London has been open for a couple of hours.

Silver got sold off for almost a dollar, but that's not all that surprising considering how illiquid the market is.  The low came at 3:00 p.m. Hong Kong time...and has gained almost all of that loss during the first two hours of trading in London.  Gold volume [as of 5:20 a.m. Eastern time] is a massive 55,000 contracts...and silver's volume is a bit over 10,000 contracts.  These are big numbers considering the price action...or lack thereof.

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I have no idea what today's trading action will bring, but I'll be watching events unfold with great interest.

See you on Friday.